Exchange tokens, previously viewed as purely a means of payment for a particular exchange, have proven to be more profitable and sustainable than many cryptocurrencies.
The May incident had almost no impact on them, and some tokens have already become full-fledged currencies. We discussed the future of exchange tokens and their prospects in the crypto-economy with KickEX founder and CEO Anti Danilevski.
"Exchange tokens, unlike most cryptocurrencies, have survived market correction relatively unscathed. What is the reason for this? Why haven't these assets fallen in value like BTC or ETH?"
A.D.: Exchange tokens are a completely separate category of crypto-assets that are different from most others because they have a real use and a high demand. Basically, exchange tokens give discounts on trade commissions and can also be used to pay for part of trade commissions. On our KickEX exchange, for example, 25% of trade commissions can be paid for with our KICK token. That is why people who buy these tokens at a low price don't rush to get rid of them when they grow – it is more profitable to use them. Exchanges burn the tokens used by traders and thus there is a growing deficit of them, and their price grows accordingly. In my opinion, a good competition to exchange tokens will be gaming cryptocurrencies, which I, as a former game developer, have been talking about for many years. We are only now starting to see the beginnings of this new trend – GameFi.
- How is the price of an exchange token formed? What factors influence its value and price?
A.D.: It's simple: the more users there are actively trading and using exchange tokens, the more of them are burned daily, the higher the demand, the higher the deficit, and the higher the price. Value is affected by how many uses a token has, for example, whether it can only be used to pay commissions or whether it gives some other bonuses. Each exchange that has its own token comes up with new mechanics for using it, or copies existing ones.
- Can stock exchange tokens be considered a full-fledged investment asset? Or do they serve more as a means of payment?
A.D.: A token that is not registered as a security cannot be considered an investment instrument. Yes, many people buy them in order to sell them at a higher price, but this is not investment, it's speculative trading, and the mechanics, although similar, are still different. Let me give you an analogy: a trader went to a vegetable warehouse and bought 50 kilos of tomatoes there. Then he goes to the market and sells these tomatoes at a 30% markup. Does he profit from the sale? Absolutely. Is he an investor in tomatoes? Of course not. But the ratio of those users who use tokens for their intended purpose and those who buy for speculative trading depends very much on the particular exchange and how it is developed and how it promotes its token.
- How do exchanges retain the value of their tokens? What mechanisms are used for this purpose?
For the most part, I already answered that question above. We went even further and combined two powerful trends in the cryptocurrency world - the exchange token and the deflationary model. In early July, we swapped the KICK token and replaced the old smart contract with a new one. This made new features, such as staking and token burning during each transaction, available to users. I will briefly tell you about them. For starters, we eliminated all excess KICK tokens. We reduced the number of tokens to 1.5 billion. Thanks to the burn feature, each KICK v8 transaction destroys up to 5%, which also helps continually reduce the number of tokens in circulation and increase the deficit on them.
As for staking, the following mechanics apply. During each KICK transaction, 5% is distributed among token holders, depending on their share of ownership. As a result, the ownership share of KICK v8 tokens by holders increases, while the share of circulating tokens decreases. This leads to a growing shortage of tokens in circulation.
- How else can exchange tokens be used?
A.D.: I can't speak for other tokens, but our KICK token provides for staking, paying trading commissions, of course, additional trading commission reduction, participation in token sales on the KickICO fundraising platform, which we recently relaunched, and in the future, acquiring various social and premium functions, such as a pro account, social gifts on the platform, various game-related stuff, and so on. In addition, if a token is exchange-traded, that doesn't mean that it is only used on the exchange. This August, for example, we will launch a small secret project where KICK will be usable as a means of payment, and we are now in talks with several companies, including gaming companies, to use KICK as a means of payment there. The more uses a token has, the higher the demand and the more promising and popular it is.
- If you had to choose between investing in popular meme coins and exchange tokens, what would you choose?
A.D.: To begin with, I would by no means call it an investment, and I explained why above. Meme coins that have no product, no real economics or use, are held up solely through hype and for as long as money is poured into advertising. Meanwhile, the ads are funded by the money of the users who bought the coins. That's why most meme coins are pure Ponzi schemes, and those who make them should be tried and put in jail. Shiba INU is an anonymous development for this very reason; no one knows the creators, and I assume that in a while we might see a big and grand scam-exit, with their exchange doing the classic rug pull method – when one team takes away all the users' funds stored there and all the liquidity they have provided for trading. I hope I'm wrong, though. That is why you should stay as far away from meme tokens as possible, and if you buy, then only buy tokens that have a real working product or many products that have been on the market for some serious time and whose token is not promoted by Elon Musk's tweets or billboards in Times Square.
- Which stock exchange tokens, in the near future, are worth investing in?
A.D.: Investing? None of them. Speculating, though, everyone has to make their own choice and never listen to advice on which token, cryptocurrency, asset, or anything else, to buy. In cryptocurrency, it's especially important to study the token in question, what and who is behind it, and whether it is worth anything at all. Never buy on hype. If you buy on hype, there's a 90% chance that you're already late and out of luck. So look for tokens that are at the "bottom" and getting ready to launch their products. Tokens with a large community and, most importantly, real use. I would certainly advise taking a look at our token, but as one might tweet these days: "I don't give financial advice".